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Tax authorities to block ITC for firms caught using fake invoices

Input tax credit

The Central Goods and Services Tax (CGST) administration has decided to block input tax credit (ITC) for taxpayers claiming credit against fake invoices, or against invoices without the receipt of goods or services, or both. The move, targeted at curbing revenue leaks, comes amidst the increase in revenue mop-up target by the Revenue Department for January and February by ₹5,000 Crore each. Over the last three months of the current financial year, it aims to collect ₹3.55 Lakh Crore.

The department collected over ₹9.08 Lakh Crore in the first nine months of FY20, in contrast with ₹8.71 Lakh Crore during the same period last fiscal. Although there was an increase, it was much lower than the average monthly collection expectation of ₹1.10 Lakh Crore set by the government.

Now, in an effort to boost revenue, the Directorate General of GST Intelligence (DGGI) under the Finance Ministry, has issued a letter to all the 26 field formations urging them to prepare a list of entities who are claiming fake credit and block ITC for those located in their respective jurisdictions.

Forward a list for entities located outside their jurisdictions

The letter added further that if the formations have any data on such entities located outside their jurisdictions, they are directed to forward a list of those, along with their GSTN particulars, to the concerned field formation with a request to block the input tax credit immediately. Data will also be collected from all the zones in order to assess how much credit is being blocked and how it will impact revenue collection.

The issue of fake invoices was discussed in the review meeting held on Friday. The GST authorities decided to look into various issues including mismatch of purchase invoices and supply, using data analytics for mismatch in GSTR-1, GSTR-2A and GSTR-3B, non-filing of returns, over-invoicing, and a data analytical review of all refunds under the inverted duty structure.

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